The Spectator’s View: Horizon Utilities merger passes muster

Potential benefits in this one justify Hamilton’s council support

Thespec.com
Oct. 28, 2015
By Howard Elliot

Corporate mergers, by their nature, are scary things. And when public utilities merge, it's even more concerning. Consumers, as taxpayers and citizens, have seen enough cases where bigger isn't necessarily better, or if it is better for someone, it's not the consumer.

So it is entirely understandable that there is considerable angst over a merger of Horizon Utilities and three other major utilities. If it happens, the merged utility would provide service to Mississauga, Brampton, Barrie, Markham and Vaughan, and would be the second-largest electricity distributor in Ontario. There are a host of related questions. What will happen to rates? Will Hamilton have less control in the governance of the larger utility? Will service be less local and responsive? Will jobs be lost? All legitimate concerns.

But the reality is this: The province and other experts have studied utilities and determined we have too many small ones to be efficient. A much smaller number of larger utilities makes more sense from the perspective of service and value. And on almost all fronts, this particular merger seems to make sense.

Service will not be centralized, but will be delivered locally as it is now. A merged utility would give Hamilton higher dividend payments and eventually, after the first 10 years when higher dividends are returned to shareholders, those dividends would result in lower costs for users - Horizon estimates the savings will be about $40 annually for residential hydro users.

The savings for the merged utility will be largely in the so-called back shop. Instead of having four payroll, administrative, inventory, HR and other systems, these can be merged into one. There would be savings in procurement. And while administrative jobs would be fewer, Horizon has pledged the downsizing would happen through retirements and voluntary departures where possible. Hamilton will retain the Horizon office on John Street although the corporate HQ would be in Mississauga.

Not all mergers end up burning the end user. Horizon itself is the result of one between Hamilton and St. Catharines utilities, and rates today are eight per cent lower than they would have been had the two remained independent.

Coun. Sam Merulla has raised a legitimate concern about the extent to which Hamilton will have less direct control over the merged utility, which has yet to be named. He is right in that the other municipalities that have ownership shares will have as much or more clout on the governing board as Hamilton does. That's a change and could be a risk.

But on balance, there is more upside to this merger than there is downside. The proposal has been heavily reviewed by credible agencies and city staff and won support. It makes sense to proceed with appropriate caution.